They've been going up all week, but only by penny or half-penny increments each day and that usually signals a run-up is about to peak out. An average gallon of regular in the L.A. area is $4.321, according to the Auto Club, which is about 57 cents higher than a month ago and about 20 cents higher than a year ago. Significantly, though, it's also 38 cents lower than the Oct. 9 all-time high. In the world of gas price psychology, consumers don't truly freak out until prices are higher than they've ever been - and that's not going to happen this time around. Still, it's not fun having to shell out an extra 10 bucks per fill-up, and along with the federal payroll tax being restored, it's raising concerns about a drop in consumer spending, especially among low-income workers..From the WSJ:
Now, Wal-Mart is stocking more of its shelves with cheaper products, and smaller-size packages of diapers, toilet paper and snacks. Burger King is cutting its Whopper Jr. sandwich to $1.29 from about $2, and focusing advertising on its value menu items rather than higher-price salads or smoothies. Kraft and meat supplier Tyson Foods Inc. are introducing more lower-priced products to help restaurants and supermarkets adapt to the consumer spending downshift.
Two years ago, when the payroll tax was reduced as a stimulus to a weak economy, restaurants reported that the extra cash in consumers' pockets was giving a boost to their business. Food chains now worry that the absence of that cash will halt those visits or encourage diners to spend less on every trip. "When people look at their paycheck and see less money, it obviously impacts their mind-set about spending," Burger King Chief Financial Officer Dan Schwartz said in an interview. Burger King said last Friday its U.S. sales growth has slowed this year, in part due to less of an emphasis on low-price items.
As for gas, it's taken off not so much because of oil prices but because of refinery issues and market speculators. Both appear to be running their course, though as we have come to expect prices come down a lot slower than they go up.